Czech Republic Power Report Q4 2013: New research report available at Fast Market Research

The future of the country's power sector is largely dependent on nuclear and renewables, although gas has a key role to play over the medium term, as it will help reduce reliance on coal in electricity generation. However, both sectors have experienced setbacks. There is an increasing level of uncertainty within the country's renewable regulatory framework, with the Government threatening further cuts in subsidies for the sector, with risks deterring potential investors. We anticipate sluggish growth across the majority of segments within the renewables industry in 2013. In addition, expected delays over the expansion of the Temelin nuclear facility create downside risk to our forecasts for nuclear in the Czech Republic.

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Investment plans suggest that generation will remain more than adequate, comfortably meeting forecasts for steady growth in domestic demand and providing the basis for continued net power exports to neighbouring countries. Longer term, the country aspires to significantly increase its nuclear power generation.

Key trends and developments in the Czech electricity market:

* Allowing for transmission and distribution losses (forecast at 5.86% in 2013, and expected to decrease to 5.81% by 2022, owing to new investment in the grid), power supply will continue to outweigh demand, allowing for continued net exports to neighbouring states. Czech power generation is forecast to reach 83.4 terrawatt hours (TWh) in 2013 and increase steadily until 2019. However, we anticipate generation to waver over the latter part of the forecast period, declining to 76.3TWh by end-2022.
* A well-publicised spat between Czech politicians over the expansion of the Temelin nuclear facility generates uncertainty about the future of the nuclear plant, based on concerns about project economics. Bringing two new nuclear reactors at Temelin online will cost an estimated US$10bn, a significant sum for a country which already has high electricity prices and a population that is feeling the pinch from biting austerity measures. Consequently, we believe there is certainly scope for the project to be delayed, creating downside risk to our forecasts for nuclear.
* The Czech Prime Minister, Petr Necas, has made it clear that the government intends to push for a reduction in renewable energy subsides and believes that the EU should avoid setting renewables or carbon emissions targets. This comes as a further blow to the Czech Republic's renewables industry, which has been rocked several times in 2013. In January, an audit discovered severe irregularities in the prices the Czech Energy Regulatory Office (ERU) levied on consumers (with regard to solar feed-intariffs). This happened again in March 2013, when the Ministry for Industry and Trade reportedly proposed a law that would effectively curb support for renewable energy developers from January 2014 onwards.

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